MarketGraphics Research Grp. v. David Berge
953 F.3d 907
| 6th Cir. | 2020

Background

  • Don Berge long served as MarketGraphics’s Memphis licensee; he formed Realysis (three single-member LLCs) after leaving MarketGraphics; David, Don’s son, was named sole member of Realysis of Memphis and used his Realysis email/name on solicitations.
  • Realysis solicited MarketGraphics’s Memphis clients; MarketGraphics lost most local customers and sued Don, David, Martha, and the Realysis entities in federal court for TCPA violations, copyright infringement, unfair competition, and related claims.
  • Before entry of a proposed judgment, Don and Martha filed Chapter 7 bankruptcy; the district court later entered MarketGraphics’s proposed judgment against David and the Realysis entities, finding willful/knowing TCPA violations and willful copyright infringement and awarding damages.
  • David then filed Chapter 7 and MarketGraphics brought an adversary complaint arguing the district-court judgment was nondischargeable under 11 U.S.C. § 523(a)(6) ("willful and malicious" injury).
  • The bankruptcy court applied a two-pronged willful-and-malicious test, held the earlier judgment did not preclude relitigation of David’s subjective intent, found no requisite malice/willfulness, and dismissed. The district court disagreed on the legal standard but remanded; on final review the Sixth Circuit adopted the two-pronged test and affirmed dischargeability.

Issues

Issue MarketGraphics' Argument Berge's Argument Held
Proper standard for § 523(a)(6) "willful and malicious" The district court urged a unitary test collapsing "willful" and "malicious." § 523(a)(6) requires separate willful and malicious showings; willful requires subjective intent to injure. Sixth Circuit adopts two-pronged approach: creditor must prove both willful (subjective intent) and malicious (conscious disregard/without just cause).
Whether the prior district-court judgment has preclusive effect on intent The judgment’s findings of "willful or knowing" TCPA violations and "willful" copyright infringement establish willfulness/malice under § 523(a)(6). The earlier proceedings did not actually litigate or decide David’s subjective intent; statutory standards differ so preclusion inappropriate. Held: issue preclusion does not apply; record lacks actual adjudication of David’s subjective intent under § 523(a)(6).
Whether TCPA and copyright findings satisfy § 523(a)(6) Treble-damage TCPA finding and willful copyright finding prove willful and malicious injury for nondischargeability. TCPA "willful or knowing" and copyright "willful" can be satisfied by lower standards (objective/reckless); they do not necessarily show subjective intent to injure or lack of just cause. Held: TCPA and copyright findings do not necessarily establish the subjective intent/malice required for § 523(a)(6); cannot infer nondischargeability from those findings alone.
Judicial estoppel claim David previously implicated himself as the operator of Realysis; he is judicially estopped from now denying that role (and intent). Positions were not clearly inconsistent, the district court did not accept David’s alleged prior position, and MarketGraphics suffered no unfair prejudice. Held: Judicial estoppel does not apply. No clear inconsistent positions accepted earlier, and no unfair prejudice shown.

Key Cases Cited

  • Kawaauhau v. Geiger, 523 U.S. 57 (Geiger establishes that § 523(a)(6) requires actual intent to cause injury)
  • Markowitz v. Campbell (In re Markowitz), 190 F.3d 455 (6th Cir.) (adopts subjective-intent standard for "willful")
  • Doe v. Boland (In re Boland), 946 F.3d 335 (6th Cir.) (discusses two-pronged test and when intent may be inferred)
  • Wheeler v. Laudani, 783 F.2d 610 (6th Cir.) (defines "malicious" as conscious disregard or without just cause)
  • Semtek Int’l v. Lockheed Martin Corp., 531 U.S. 497 (addresses choice-of-law considerations for preclusion when federal courts hear supplemental/state claims)
  • New Hampshire v. Maine, 532 U.S. 742 (sets out judicial estoppel factors)
  • Barboza v. New Form, Inc., 545 F.3d 702 (9th Cir.) (finding that reckless copyright infringement does not necessarily satisfy § 523(a)(6))
  • McClendon v. Springfield (In re McClendon), 765 F.3d 501 (5th Cir.) (example of circuits applying a unitary test)
  • Bridgeport Music, Inc. v. UMG Recordings, Inc., 585 F.3d 267 (6th Cir.) (addresses jury instruction and good-faith issues in copyright willfulness)
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